Sri Lankan economy - strong and resilient despite shocks
- Central Bank

[Wednesday, July 25, 2007 - 10.00 GMT]

Sri Lanka's economic performance has been strong and resilient despite numerous material adverse shocks in recent years, including the Tsunami, the security situation, an adverse commodity price environment- particularly oil, and negative sentiments, said the Governor of the Central Bank Mr. Ajith Nivard Cabraal, at a media presentation on the "Sri Lankan Economy -
Current Status and Prospects" held today (July 25).

The strong economic performance has been underpinned by strong domestic demand, steady growth in the export sector, a notable growth in remittances,
and improved efficiency of financial intermediation.  

The Central Bank's Governor said the macro-economic framework in Sri Lanka is conducive to sustainable levels of strong growth due to:

*  Fiscal consolidation underway, which is the result of comprehensive improvements on both the revenue and expenditure sides 

*  Lower public sector debt burdens and strong debt structure, which reduces the country's vulnerability to confidence shocks, and  

*  Counter-cyclical monetary policy aimed at combating inflation, in the context of ensuring sustainable growth.

Dr. H. N. Thenuwara, Director, Economic Research of the Central Bank said the long standing resilience of the Sri Lankan economy and its sustainable growth was seen by its ability to face up to shocks such as the Tsunami, the hikes in oil prices, terrorism, and continuing aspects of unfavourable weather conditions. The Sri Lankan economy was exposed to these shocks as much as many other countries of the world today, he said.  

He explained that the fundamental reason for continued growth of the Sri Lankan economy was due to the larger sections of the economy being owned and
managed by the private sector.  

The Central Banks Governor, Mr. Cabraal said the fact that the economic and financial variables in Sri Lanka were performing well amidst external shocks is seen by the strong GDP growth and growth in investments; the declining rate of unemployment; the improvement in fiscal performance; declining of Public Sector debt, and the healthy conditions prevailing in the banking sector. 

The Sri Lankan economy has been growing at an average rate of 6% since 2002, and the country has outperformed peers in the region, as well as countries
with B and BB ratings, despite the fact that strong commodity prices have been a drag on, rather than an impetus to, growth, unlike other commodity producing countries. 

Mr. Cabraal said: "We would like do even better since we would be the first to admit that we have a long way to go and have a greater challenge ahead of us. But, we are certainly not as bad as some my claim." 

He said it was important for Sri Lanka to do better by strengthening the Private Sector, ensuring the faster implementation of projects, particularly the many major development projects that were in the pipeline. He also
suggested that it would be useful to consider establishing a Projects Division in Government to fast-track implementation of approved projects.

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Last Updated Date: July 25, 2007 - 10.00 GMT